Baer.Intro

Reading: Cases on the Canadian Law of Insurance, Sixth Edition, Carswell, 2000

• pp. 67-91
• pp. 93-100
• pp. 302-304
• pp. 518-529
• pp. 821-827
• pp. 829-831.

Candidates are responsible for the following cases:

• Glenn v. Scottish Union and National Insurance Company Ltd. (Chapter 1)
• Fletcher v. MPIC (Chapter 8)
• Dillon v. Guardian Insurance (Chapter 11).

Authour: Baer, M.G. and Rendall, J.A.

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BA Quick-Summary: Cases on the Canadian Law of Insurance Glenn v. Scottish Union – In this indemnity contract case, the insured first recovered from the at-fault insurer, then sought payment from his own insurer. The court held that because it was a true indemnity policy, the insured couldn’t “double recover” and the insurer had no obligation to pay again. This illustrates the principle of no double recovery and confirms indemnity contracts don’t require duplicate compensation. Fletcher v. MPIC – The SCC found that the public insurer breached its duty to inform the insured of critical underinsured motorist coverage. MPIC’s flyer and renewal notice were deemed insufficient, so the court held it liable in tort for failing to adequately disclose optional coverage. Dillon v. Guardian Insurance – When the insurer declined a settlement offer within policy limits and the final judgment exceeded those limits, the court held the insurer liable for the excess judgment. It affirmed that insurers can be responsible for excess amounts when they unreasonably refuse a settlement within limits.

Pop Quiz

In the reading Landmark Legal Insurance Cases in Canada, there are 4 cases concerning the duty-to-defend. What are they?

Study Tips

Baer & Rendall is a foundational paper on the insurance industry in Canada - covers the most often asked essay-question: legislation regarding insurer solvency. [Hint: CIRCA-F]

The 2018.Fall syllabus update removed 2 legal cases from this reading:

• Regal Films Corporation Ltd. v. Glens Falls Insurance Company (Chapter 2)
• Broadhurst and Ball v. American Home (Chapter 11)

Estimated study time: 1-2 days (not including subsequent review time)

BattleTable

Based on past exams, the main things you need to know (in rough order of importance) are:

• Canadian legislation (federal & provincial) promoting insurer solvency: CIRCA-F
• CASE: Glynn v Scottish Union
• CASE: Dillon v Guardian
• miscellaneous facts:

- role of CCIR

- policy types

- solvency regulation

- insurance regulation in general: MOTHS

- foreign insurers (requirements, advantages, disadvantages)

• CASE: Fletcher v MPIC

Top Questions ← Questions you absolutely need to know!

Questions held out from Fall 2019 exam: #1, 6. (Skip these now to have a fresh exam to practice on later. For links to these questions, see Exam Summaries.)

reference	part (a)	part (b)	part (c)	part (d)
E (2019.Spring #1)	IBC - objectives (SCED-P)	regulation - guidelines vs legislation	federal legislation: - foreign insurers
E (2017.Fall #4)	CASE: - Glynn v Scottish Union	see Land.Cases
E (2017.Spring #4)	CASE: - Glynn v Scottish Union	outdated	see Land.Cases
E (2015.Fall #4)	see Land.Cases	CASE: - Dillon v Guardian	see Land.Cases	see Land.Cases
E (2015.Spring #1)	insurer solvency: - federal/prov. (CIRCA-F)	see McD.Intro
E (2015.Spring #2)	CCIR - mandates	see Mayhall.USreg
E (2015.Spring #7)	policy types: - life insurance	policy types: - 'indemnity' policies	policy types: - 'valued' policies
E (2014.Fall #1)	solvency regulation: - federal / provincial	see Mayhall.USreg	see Mayhall.USreg	see Mayhall.USreg
E (2014.Spring #1)	insurer solvency: - federal/prov. (CIRCA-F)	solvency regulation: - origins	see McD.Intro
E (2014.Spring #10)	foreign insurers: - advantages/disadvantages
E (2013.Fall #9)	insurance regulation: - what it covers: MOTHS	see ICA.Ch47
E (2012.Fall #10)	CASE: - Dillon v Guardian

In Plain English!

Intro

At about 60 pages, this is one of the longest readings on the syllabus, and there are almost 100 BattleCards (55 of higher probability of appearing on the exam, and 40 of lower probability.)

• In reality, however, the number of BattleCards with the highest probability of appearing on the exam is more like 15-20.
• The Baer reading had always been ranked in the Top 24 but had fallen out of that range recently. It then reappeared in 2019.Spring. Maybe the CAS is bringing it back?

I like this reading and I studied it thoroughly myself because it provides good background information on insurance in Canada. But if you're pressed for time, your best strategy is to play the odds and narrow your focus to the items discussed below. (On average, this reading accounts for 1.5 points on the exam.)

Section 2.1: Insurance Industry in Canada

Here is what I would consider the highlights of this section:

• Types of insurance carriers: (Further descriptions of each are in the BattleCards.)

individual U/W

joint stock company

mutual insurance company

reciprocal/inter-insurance exchange

• What do rating bureaus do?

promulgate (rates, terms of contracts) - it is an APPROVED way for insurers to COOPERATE in setting adequate rates

• 5 objectives of IBC (Insurance Bureau of Canada): SCED-P

STUDY legislation

COLLECT/analyze data

ENGAGE in research

DISCUSS general insurance

PROMOTE public understanding

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Section 2.2: Nature of Insurance Regulation

There is an important concept from page 73 in the source reading regarding the promotion of solvency through federal and/or provincial legislation. Note how it compares to page L-95 of the McD.Intro source reading. That section in McD.Intro concerns only federal regulation of insurance but some of the points are the same.

Question: identify areas of Canadian legislation (federal/provincial) that promote financial soundness of insurance companies [Hint: CIRCA-F]

Creation (domestic) & licensing (foreign) of insurers

Investments (restrictions on investments)

Rating bureaus (authorization of rating bureaus)

Compliance (enforce compliance by giving government departments authority)

Adequacy of rates (create boards to oversee rates)

 –

File F/S (Financial Statements) regularly

Continuing on, there is another similar-sounding question that is starting to reappear on exams.

Question: identify matters over which the federal parliament has exclusive authority (2017.Fall #1a), (2017.Spring #1a)

The answer is actually in McD.Intro which is a paper on Life Insurance Laws in Canada, but it also covers basic facts about the Canadian government. I've included it here to so you see the subtle difference as compared to the previous question on insurer solvency. The examiner's report says:

• regulation of trade & commerce
• taxation
• banking
• bankruptcy & insolvency
• immigration
• criminal law

The difference between this and the earlier question, is that the earlier question was about legislation promoting financial soundness, whereas the latter question was about general legislation. General legislation may include financial soundness but would also include other things. So there you have it. Know the difference.

Yet another similar-sounding question is as shown below. But note that it hasn't appeared since (2013.Fall #9a)

Question: what has been the focus of Canadian insurance regulation since Confederation [Hint: MOTHS] (Thx xQEDx!)

Marketing: marketing integrity & improvement of insurance contract

Ownership: encourage Canadian ownership

Taxes: collection of taxes

Honesty: honesty & integrity of intermediaries (agents, brokers,...)

Solvency: keep insurers solvent to protect policyholders

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Section 2.3: Types of Insurance

I suggest reviewing the BattleCards of this section for the similarities and differences between social and private insurance. This is a perennial issue in political debates.

• Medical insurance is frequently in the news, but other important examples of social insurance are WC (Workers' Compensation) and EI (Employment Insurance)
• These are not examples of P&C insurance, but you need to know at least a little bit about them. Note that the basics of pensions / medical / WC / EI are covered in the reading by Morneau.

But the most important items from this section are:

• Principle of Indemnity:

after a covered loss, return insured to former financial position (before loss), and neither penalize nor reward

• Contract of Indemnity:

a contract where the amount recoverable is MEASURED by insured's pecuniary loss

• Note that by this defn of indemnity, a life insurance policy is not a contract of indemnity. The amount recoverable is not measured by the loss - the amount payable is fixed and written into the contract. (2015.Spring #7a)

There is also a legal cases in this section:

• Glynn v Scottish Union & National: Glynn is injured and tries to double-recover his losses. Courts say no because double-recovery violates the principle of indemnity.

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Section 7.3: Subrogation & Collateral Benefits

A question that has appeared on exams prior to 2012 is:

• Loss-sharing options for tort recovery versus collateral sources: E(C)RR
  • E: ELECTION (pick either tort recovery OR collateral source)
  • (C): CUMULATION (recover from BOTH tort system AND collateral source - may violate principle of indemnity)
  • R: REIMBURSEMENT (amount not covered by tort recovery IS COVERED by collateral source)
  • R: RELIEF (tortfeasor's liability REDUCED by collateral source)
• What this means is that if a claimant has access to 2 sources of recovery, (tort recovery & collateral source), how much do they get from the tort recovery source, and how much do they get from the collateral source.
  • The answer depends on the situation. I don't think you'll be asked to speculate - it should be enough just to understand the 4 different options.
  • If you were asked to speculate, keep in mind the principle of indemnity and the intent of subrogation:

Subrogation is intended to prevent over-compensation of insured.

• Recall the defn of subrogation - the right for an insurer to legally pursue a third party that caused an insurance loss to the insured.

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Baer Cases

The last major portion of Baer is 2 legal cases:

• Fletcher v MPIC (Manitoba Public Insurance Corporation): Concerns the responsibility of the government when it is the issuer of insurance.
• Dillon v Guardian Ins Co: Concerns the concept of absolute liability

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Odds & Ends

There are just 3 BattleCards in this final mini BattleQuiz, but they are important. (Alice the Actuary highly recommends that you don't skip them!)

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BattleCodes

• Memorize:
  • 5 objectives of IBC (Insurance Bureau of Canada): SCED-P
  • Canadian legislation (federal & provincial) promoting insurer solvency: CIRCA-F
  • principle of indemnity, contract of indemnity
  • 4 loss-sharing options for tort recovery versus collateral sources E(C)RR
  • 3 legal cases
  • See BattleCards for miscellaneous details

• Conceptual:
  • If there is a single over-arching idea in this reading, it would be the principle of indemnity. There are examples here that show why an auto policy is a contract of indemnity and why a life insurance policy is not a contract of indemnity. You understand this now too, right? RIGHT??!!!

• Calculational:
  • none

• Final Comments
  • I'd like to emphasize that the Baer reading is foundational.
  • It is also long, and there are almost 100 BattleCards (if you count those of both higher and lower probability), but there are normally only about 1.5 points devoted to this reading on any given exam.
  • That said, if you're pressed for time, learn CIRCA-F first!! Then focus on the items in this BattleWiki article. (The other stuff, while interesting and important, does not seem likely to be asked, based on past exams.)
  • GOOD LUCK! If you've been doing the readings in order, you're almost 80% of the way through the material that typically appears on the exam!

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POP QUIZ ANSWERS

Of the 4 duty-to-defend cases from the Landmark reading, 3 involve a primary insurer, and the other involves an excess insurer:

• PRIMARY insurer: (Sansalone v Wawanesa), (Nichols v American Home), (Precision Plating v Axa Pacific Insurance)
• Excess insurer: (Alie v Bertrand Frere construction)